Posted on 08/15/2005 5:55:06 AM PDT by OESY
A major domestic battle looms this fall, when tax reform-- a centerpiece of the president's bold domestic agenda-- will finally be on the table. The President's Advisory Panel on Federal Tax Reform is expected to release its findings by the end of September. After the political shellacking the White House took on Social Security, the administration will be strongly tempted to take a conciliatory path that supports only superficial reforms, essentially preserving the status quo of our hideous income tax code.
Such a course would have perilous consequences, economically and politically. In fact, the administration has an opportunity here to boldly retake the initiative, to recover lost political support and thrust an already decent economy into high gear and, at the same time, make America better able to meet intensifying competition from China, India and others. How? By junking the entire federal income tax code and starting over with a flat tax. A growing number of countries are doing this -- and so should we.
The current system is beyond redemption, a beast whose complexity, confusion and outright unfairness have corrupted our economy and society. Americans waste more than $200 billion and over six billion hours each year filling out tax forms. They engage in all kinds of useless economic activity intended to take advantage of the code's complicated maze of deductions and to reduce taxes -- from deducting donations of old socks to making unwanted investments. The waste of brainpower -- at a time of increasing global competition -- is incalculable.
The code corrupts our system of government by encouraging the crassest political conduct and by creating a massive, intrusive federal bureaucracy. One-sixth of the private-sector employees in Washington are employed by the lobbying industry. One-half of their efforts are directed at wrangling changes in the tax code....
(Excerpt) Read more at online.wsj.com ...
That's a grossly unfair characterization of what I do. I play by the rules. That's what I do. You don't like the rules? Well, I don't always like them, either. But no one asked my opinion, and the rules aren't necessarily the rules I would pick
I don't know why you choose to interpret that as a slur when it is a simple statement of the facts. I am not blaming you for anything, I am only stating that the way the system is set up you are one of the ones who are benefiting from it by knowing all the ends and outs, or by paying someone who does.
For about 30 years I sold capital equipment. As part of the sales process I would often prepare tax amortization and depreciation schedules showing the accumulated cash flow resulting from a purchase. These were illustrations of how to use the existing tax rules to an advantage. It all boiled down to a version of the Fram filter commercial, "Pay me now or pay me later." Instead it was "Spend the money on your business or give it to Uncle Sam." It was not whether but to whom.
With the NRST it is simply whether. To think Uncle Sam is helping you buy something, or make money, is a fools game. I am reminded of the fellow who would hit himself in the head with a hammer because it felt so good when he quit.
What if Uncle Sam were not going to take your money? Would you be unhappy? You would lose the tax benefits because there would be no taxes from which to seek shelter. The fellow with the hammer would get no relief because there would be no pain.
I give you exhibit A:
It isn't like the govt is going to give me back part of the cost I expended on the property, and in fixing it, to compensate me for getting screwed by the fact that I won't derive any additional income through tax savings, while the rest of my personal expenditure costs rise by the average sales tax I will have to pay.
I don't know the transition rules well enough to explain them but you may in fact get a credit against future taxes. Regardless, surely you see the foolishness of complaining about not getting tax breaks on a now non existent tax.
If you can't we are back where we started.
"You and I will never agree because you are one of those making money off the system and I am trying to get rid of the system so that everyone can make money unimpeded by the system."
If you want to make money buying and renting property why not just do it? Why do you need the stick of a tax and the carrot of spending the money on yourself instead of giving it to the government?
As far as collecting taxes, you said you are already doing that. With the NRST you will keep a portion of what you collected for your trouble.
Just a reminder. . . The top 20% of earners (the rich) pay 80% of taxes.
Roger that ~ works for me!
"We already have 'luxury taxes' and 'vice taxes'. What would make anyone think such things wouldn't come about over and above a national sales tax? And we pay, and pay, and pay. And do you ever hear anyone seriously suggesting that it's just a crime for the government to impose such sector a taxes and be effective in getting rid of them?
The answer is NO. The money is too easily had."
"It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, 'in political arithmetic, two and two do not always make four.' If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them."
Alexander Hamilton in Federalist #21
Why do you think they make you do the mandatory IRA distribution? To be sure you get enough to eat? NO! They want the tax! Under the Fair Tax, there would be no minimum distribution and no tax when you pulled it out. Since you apparently are doing well without having to pull the money out, you could give some now to your heirs or give to charity, all tax free.
2) Eliminate capital gains taxes on anybody over 65.
What makes YOU so special? Why not eliminate it for everybody?
3) create an annual tax credit for anybody who pays off their home (wife and I paid ours off this year)...... this encourages people to be fiscally sound and to avoid the "cashout some of your equity" trap.
Under the Fair Tax, you pay down your mortgage tax free every year.
No, it's not. It's worse. The laws of Physics and chemistry don't change that much. Only new discoveries. The tax laws change every dang year.
If we're engaging in social engineering based on income now, what kind of politics can we expect with statistics like: Americans spend more on guns than they do on antacids! Horrors! They must be taxed more!
I don't trust Congress any farther than I can throw the capital.
Nothing at all stopping them from doing that right now with standard excise taxes except voter displeasure with such an action.
As far as monitoring by sector. A National Sales Tax provides nothing that they don't already have through the Bureau of Economic Analysis, and Bureau of Labor Statistics.
We already have "luxury taxes" and "vice taxes". What would make anyone think such things wouldn't come about over and above a national sales tax?.
Excise taxes will always be there, just as they are there now. A NRST is an excise.
As always it is up to the American people to constrain their representation in govenment. Always has been, always will be. There is nothing about an NRST that is going to encourage the activities that you describe any more than they are engaged in today. In fact with tax visible and at the rate it must be, additional taxation on products are discourged more than aided, as every voter is affected by any increase in a retail tax system.
And do you ever hear anyone seriously suggesting that it's just a crime for the government to impose such sector a taxes and be effective in getting rid of them?
That could be be because such taxes are Consitutional,
Constitution for the United States of America:
- Article VI: "This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding."
- Article I Section 8: "The Congress shall have power to lay and collect taxes, duties, imposts and excises,
to pay the debts and provide for the common defense and general welfare of the United States;
but all duties, imposts and excises shall be uniform throughout the United States; "
- Article I Section 8: "To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof."
and the primary means by which government was envisioned to be funded by the founders?
- "A nation cannot long exist without revenues. Destitute of this essential support, it must resign its independence, and sink into the degraded condition of a province. This is an extremity to which no government will of choice accede. Revenue, therefore, must be had at all events. In this country, if the principal part be not drawn from commerce, it must fall with oppressive weight upon land."
- "The ability of a country to pay taxes must always be proportioned, in a great degree, to the quantity of money in circulation, and to the celerity with which it circulates. Commerce, contributing to both these objects, must of necessity render the payment of taxes easier, and facilitate the requisite supplies to the treasury."
"Imposts, excises, and, in general, all duties upon articles of consumption, may be compared to a fluid, which will, in time, find its level with the means of paying them. The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions. "
"It is a signal advantage of taxes on articles of consumption that they contain in their own nature a security against excess.
They prescribe their own limit, which cannot be exceeded without defeating the end proposed - that is, an extension of the revenue."
When applied to this object, the saying is as just as it is witty that, "in political arithmetic, two and two do not always make four."
If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds.
This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.
The Records of the Federal Convention of 1787
(Farrand's Records)
James Mchenry before the Maryland House of Delegates.
Maryland Novr. 29th 1787--
Appendix A, CXLVIa, page 149, S9."Convention have also provided against any direct or Capitation Tax but according to an equal proportion among the respective States: This was thought a necessary precaution though it was the idea of every one that government would seldom have recourse to direct Taxation, and that the objects of Commerce would be more than Sufficient to answer the common exigencies of State and should further supplies be necessary, the power of Congress would not be exercised while the respective States would raise those supplies in any other manner more suitable to their own inclinations --"
The answer is NO. The money is too easily had.
The answer is Yes because every other means is too susceptible to hiding the mechanisms by which the tax system operates and is more easily used to manipulate the voting public to maintain politicians in office. Whenever you have a tax system in which only a fraction of the electorate visibly participate in a significant way:
"the top 50 percent ($36,000 and over) paid 96 percent of income taxes. Guess what the bottom 50 percent of income earners paid?"
--- Walter Williams.
An electorate is ripe for manipulation:
| "As a matter of fact, what the income tax does — and this is the debate that I think we always try to get into in order to let you and him fight, see — and the people of this country are led down a path where the actual control of their resources, which in the end is the control over their will, is handed off to the government." . . . "The government then manipulates that will in order to destroy the freedom of our electoral system through the income tax structure, and we call the resulting slavery a free system." "In point of fact, it is not as the founders understood, and the only way to restore real freedom is to give people back control over the income that they earn so that they won‘t, at the voting booth and in other phony issues, be subject to that manipulation." |
| I discussed the importance of abolishing the income tax because of its tendency to form a habit of servility in the souls of a people that accepts it. Servility of soul is bad not only in itself, it is also an open door through which will soon walk the abuses of ambitious government power. Leaders who find themselves with governmental power over a servile people will be quick to conclude that such a people exist to serve them. |
"The problem will come in when it is 30% on top of prices which won't go down much. This will likely wreck the economy in terms of consumption of new goods, which will be bad for tax revenue and devastating for businesses that manufacture goods and provide services."
"In 1997, Congress's Joint Tax Committee began to explore what a fundamental reform of the tax code would look like and what effect it would have on our economy. The Committee discovered it didn't even have a valid model to predict the outcome, because the Committee's models were all designed to nibble around the edges of the tax code. So the committee called in teams of economic experts to model the impact on our economy of replacing the income tax with a consumption tax. What did these teams of economic experts discover? Every one of those nine teams found that a consumption tax would grow the economy faster than the current system. From liberals to conservatives, every economic team recognized the drag that the current system places on our economy. While some of these experts felt that the growth would be rapid and others believe growth would only occur more slowly over time, everyone believed a consumption tax would grow the economy faster than any growth we would experience under the present system."*
* The FairTax Book by Neal Boortz and John Linder, p. 110
They seem to think prices will go down, I don't see how. Any answer for my #259? How will my costs go down as a business under FairTax? I am still paying as much out of pocket for labor, but I give it all to the employee instead of sending some of it to the government. My cost is the same--
Say I am a manual carwash (or any other business with fairly high labor costs)-- how do I reduce my prices by 23% to enable me to add the 30% FairTax and have my customers pay the same final price.
So that we are viewing the same information, please provide a link to Linder's testimony.
A perfect formula for social engineering. Tax cigarettes out of existence and apply a slightly higher rate across other products to compensate. I wouldn't count of Congress to exercise the laissez faire mentality of Hamilton.
In Georgia, stores can't sell alcohol on Sunday. Why hasn't that been done away with? It is my understanding the courts have found that since the state of Ga. collects taxes on alcohol the state can decide when and where it will collect those taxes. So the state winds up shutting down the package stores on Sunday.
If HD's certificate can be revoked can't the Gov shut them down because they can no longer collect the tax? If so, this will have to be addressed in the write-ups.
I assume by manual carwash you mean one where it gets sent through a line and then guys vacuum and dry it on the end. That would be more labor intensive than one where you go into a stall and wash your own car with a wand after putting quarters in the machine.
You no longer have to pay federal income or self employment tax on the profits of your business. You no longer have to pay employer fica on your employees wages. You no longer have to pay a CPA to do your taxes. You no longer have to pay the vendors embedded tax and compliance costs on soap, wax, towels, tire cleaner, leather conditioner, office supplies, checks, etc. You no longer have to file quarterly payroll tax returns for your employees, or make quarterly tax deposits for your own taxes. You don't have to worry about whether a person is an employee or contract labor. You can make business decisions, such as whether to open a new car wash across town, without considering the income tax repercussions if you do. You can sell your business without worrying about capital gains taxes on the sale. You don't have to worry about your heirs having to sell your business to pay the estate taxes. Your own taxes on the profit of your business may be the single biggest expense you have, and cannot be ignored.
All of these things are drags on your business created by the current income tax code. They all cost money, whether you realize it or not.
It seems to me that any tax which allows immunity from it under certain conditions is admittedly unfare on its face. Else why the need for relief?
Oh, I think they'll figure it out easily enough. That is a weak argument.
Here's what you do. Get a sales tax certificate from each of the businesses you sell (provide service, in your case) to. Then, when you sell to them, put their name on the invoice (What! You're doing that now?) Then, when you post that invoice into your bookkeeping system, record that sale (cash or A/R) under their name (Hmmm. You're doing that now?)You might have two categories of sales. Taxable, and nontaxable (or Business and individual). Then, when you file your sales tax return, take the total of the two sales types and put them on the first line for "Total sales". Then take your taxable sales and put them on the "Taxable sales" line. Then put the amount of the tax on line 3. (Just makin' up the tax form in my head. That's kind of the way the Texas Sales and Use tax form is).
When the sales tax auditor comes, give him your sales tax returns and your books. He will first track your sales to your books. He will then randomly test your sales in your books and trace them back to your invoices. Then he will randomnly test some of your business invoices to see if you have tax certificates for them. Do your accounting right, get your tax certificates, and the audit is relatively painless. Stick the auditor in another room with your books and your invoices and forget him. If you've done things right (which isn't hard) then he'll come back to you in three or four hours with a no change audit. If you don't have a tax certificate, call your customer and have them fax you one.
Now, for a description of an IRS audit. Bend over.
I see you've received several responses. I'd just like to add that the FairTax bill has no provisions at all for collecting any information that would lead to the sort od discrimination of different sectors as you envisions.
One of the cornerstones of the FairTax is a lot of freedom from government intrusion - and not just in collecting taxes.
Great description ... and quite accurate for both state and fed.
No, there's no provision at all in the entire FairTax scheme of things for that sort of selective taxation. There is only a single rate applying to all taxable retail sales.
You might find it of interest to read the first few pagess of the bill itself:
http://thomas.loc.gov/cgi-bin/query/z?c109:H.R.25:
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